Trustees say full steam ahead on leasing Munroe

Published: Thursday, November 15, 2012 at 7:53 p.m.

Last Modified: Thursday, November 15, 2012 at 7:53 p.m.

Hospital District trustees overseeing Munroe Regional Medical Center agreed Thursday to move forward with plans to lease the public hospital and continue talks with two private health care companies that want to take over its operations.

The decision was not unexpected after voters on Nov. 6 rejected a hospital tax referendum meant to subsidize the institution.

In a last-ditch effort to consider a partnership with another nonprofit hospital, trustees on Thursday agreed to open discussions with another such facility if they were still interested.

But Munroe consultants warned that a nonprofit likely wouldn't be able to match the financial lease offers that two private health care companies have already placed on the table for Munroe.

Trustees agreed to consider other options at this late date only if it didn't slow the current lease search process. The search for health care companies interested in leasing Munroe began in October 2011 and trustee consultants warned trustees to avoid "deal fatigue" among the two suitors.

Last year the district trustees formed a Strategic Options Workgroup to review private health care proposals to lease the hospital and eventually make a recommendation to trustees.

Munroe president and CEO Steve Purves said a couple of nonprofit health care companies also might be interested in forming a partnership with Munroe, but no formal proposals have been made at this point.

Trustee Joe Hanratty said talk of nonprofit partnerships was just delaying the process.

"I think we have two really good proposals. I think we need to move forward with where we're at," Hanratty said.

Trustee consultant Casey Nolan said making sure there were no worthy nonprofit potential partners could do no harm.

"It's worth the investment of time, which won't be very much," Nolan said.

Although the hospital is financially stable for now, its MRMC executives predict it can't continue as it has.

They say its eroding financial picture is caused by a large number of poor patients who cannot afford to pay or who pay very little and Medicaid payments that don't cover the real cost the health care the hospital provides its patients.

Earlier this year the hospital's board approved a $323 million budget for fiscal 2013, but had to dip into the hospital's reserves for $9 million to make ends meet.

Taking the $9 million meant leaving the hospital with an estimated 128 days of cash reserves by the end of fiscal 2013, which is below Fitch's A-rated median of 158 days of cash reserves.

The looming financial crisis prompted hospital trustees to investigate two possible solutions, a taxpayer-supported bond or leasing the hospital to a large health care company that could run it more profitably than it can as an independent hospital.

The tax rejected by voters earlier this month would have backed the $65 million bond, less than half the amount hospital leadership said was necessary to overhaul the facility and keep it competitive. But supporters said the money would have bought the 421-bed hospital time to see if its financial outlook could improve.

Supporters' opposition to a lease is based on fear that a private hospital company would cut essential services to make it profitable and degrade the quality of a medical center that has been acknowledged as one of the best of its size in the nation.

Strategic Options Workgroup member Dr. Harvey Taub noted that during their presentations, the companies vying for the Munroe lease insisted they could improve the financial stability of the hospital in a way that the current administration could not. As larger institutions, he recalled them saying, they could accomplish this through "economies of scale" and higher reimbursement rates they have negotiated with insurers.

Taub said the hospital staff's fears of cutbacks would be put to rest if they could see those rates and be certain the companies could deliver on their promises.

Eb LeMaster of Ponder & Company, a consultant helping guide the lease negotiations, said it's unlikely either company would divulge its rates, however.

The two health care companies are:

Duke LifePoint Healthcare, a joint venture of Duke University Health System and LifePoint Hospitals, is offering $375 million for a 40-year lease. Some trustees say this group appears to be most compatible with Munroe.

A Health Management Associates/Shands HealthCare partnership is offering between $440.2 million and $500.2 million. HMA owns or leases 70 hospitals nationwide and has affiliations with 32 hospitals in Florida, including some in the Shands group.

<p>Hospital District trustees overseeing Munroe Regional Medical Center agreed Thursday to move forward with plans to lease the public hospital and continue talks with two private health care companies that want to take over its operations.</p><p>The decision was not unexpected after voters on Nov. 6 rejected a hospital tax referendum meant to subsidize the institution.</p><p>In a last-ditch effort to consider a partnership with another nonprofit hospital, trustees on Thursday agreed to open discussions with another such facility if they were still interested.</p><p>But Munroe consultants warned that a nonprofit likely wouldn't be able to match the financial lease offers that two private health care companies have already placed on the table for Munroe.</p><p>Trustees agreed to consider other options at this late date only if it didn't slow the current lease search process. The search for health care companies interested in leasing Munroe began in October 2011 and trustee consultants warned trustees to avoid "deal fatigue" among the two suitors.</p><p>Last year the district trustees formed a Strategic Options Workgroup to review private health care proposals to lease the hospital and eventually make a recommendation to trustees.</p><p>Munroe president and CEO Steve Purves said a couple of nonprofit health care companies also might be interested in forming a partnership with Munroe, but no formal proposals have been made at this point.</p><p>Trustee Joe Hanratty said talk of nonprofit partnerships was just delaying the process.</p><p>"I think we have two really good proposals. I think we need to move forward with where we're at," Hanratty said.</p><p>Trustee consultant Casey Nolan said making sure there were no worthy nonprofit potential partners could do no harm.</p><p>"It's worth the investment of time, which won't be very much," Nolan said.</p><p>Although the hospital is financially stable for now, its MRMC executives predict it can't continue as it has.</p><p>They say its eroding financial picture is caused by a large number of poor patients who cannot afford to pay or who pay very little and Medicaid payments that don't cover the real cost the health care the hospital provides its patients.</p><p>Earlier this year the hospital's board approved a $323 million budget for fiscal 2013, but had to dip into the hospital's reserves for $9 million to make ends meet.</p><p>Taking the $9 million meant leaving the hospital with an estimated 128 days of cash reserves by the end of fiscal 2013, which is below Fitch's A-rated median of 158 days of cash reserves.</p><p>The looming financial crisis prompted hospital trustees to investigate two possible solutions, a taxpayer-supported bond or leasing the hospital to a large health care company that could run it more profitably than it can as an independent hospital.</p><p>The tax rejected by voters earlier this month would have backed the $65 million bond, less than half the amount hospital leadership said was necessary to overhaul the facility and keep it competitive. But supporters said the money would have bought the 421-bed hospital time to see if its financial outlook could improve.</p><p>Supporters' opposition to a lease is based on fear that a private hospital company would cut essential services to make it profitable and degrade the quality of a medical center that has been acknowledged as one of the best of its size in the nation.</p><p>Strategic Options Workgroup member Dr. Harvey Taub noted that during their presentations, the companies vying for the Munroe lease insisted they could improve the financial stability of the hospital in a way that the current administration could not. As larger institutions, he recalled them saying, they could accomplish this through "economies of scale" and higher reimbursement rates they have negotiated with insurers.</p><p>Taub said the hospital staff's fears of cutbacks would be put to rest if they could see those rates and be certain the companies could deliver on their promises.</p><p>Eb LeMaster of Ponder & Company, a consultant helping guide the lease negotiations, said it's unlikely either company would divulge its rates, however.</p><p>The two health care companies are:</p><p>Duke LifePoint Healthcare, a joint venture of Duke University Health System and LifePoint Hospitals, is offering $375 million for a 40-year lease. Some trustees say this group appears to be most compatible with Munroe.</p><p>A Health Management Associates/Shands HealthCare partnership is offering between $440.2 million and $500.2 million. HMA owns or leases 70 hospitals nationwide and has affiliations with 32 hospitals in Florida, including some in the Shands group.</p><p><i>Contact Fred Hiers at 867-4157 or fred.hiers@starbanner.com.</i></p>